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Canada left out as auto industry invested $17.6 billion worldwide

China receives vast majority of industry's new capacity.

The new 2015 Chrysler 200 undergoes assembly at a refurbished plant in Sterling Heights, Mich. While the global auto industry added $17.6 billion in new plant capacity in 2013, none of that was destined for Canada, a new report says. (Bill Pugliano/Getty Images)

The global auto industry announced $17.6 billion in new assembly plant capacity last year, but none of it was destined for Canada, research by the University of Windsor finds.

Total global investments in auto industry capacity were 9.2 per cent higher than a year earlier, the Annual Automotive Assembler Investment Report found.

China led the way, accounting for $12.7 billion, or 72.2 per cent, of all new investments, said the report compiled by the university’s Office of Automotive and Vehicle Research.

Brazil was a distant second at $1.6 billion.

Over the past four years, China has attracted $47 billion in new auto industry investment, or 62.6 per cent of all new announcements.

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In comparison, Canada has attracted less than 1 per cent of announced new capacity over the past four years, the report found. In 2012, the country attracted $180 million in new investment.

The report looked only at announcements that expand auto assembly capacity. Thus, it does not include Ford of Canada’s announcement last September that it will invest $700 million in new equipment and machinery to make its Oakville plant more flexible.

Toyota Canada has boosted production at its plants but those investments were included in the previous year’s report.

In fact, automotive assembly in Canada fell by 3.7 per cent to 2.4 million units last year despite a 4 per cent rise in demand in Canada and a 7.5 per cent increase in the U.S., where 80 per cent of Canadian production is sold.

In the U.S., production rose 7 per cent to 10.9 million vehicles last year.

Production in Mexico grew a tepid 0.6 per cent but continued to outrank Canada, at 2.9 million units, for the sixth year in a row.

The auto industry is considered attractive both because its pays relatively high wages and because it creates at least nine spinoff jobs in auto parts and other services for every assembly line worker.

Canada’s industry is hampered by concerns about the relatively high dollar, high labour costs and big incentives offered by U.S. and Mexican governments, the report says.

Last month, Chrysler Group LLC ended talks with the Canadian and Ontario governments over a planned expansion of its plant in Windsor, saying it had become a political football.

Sergio Marchionne, Chrysler’s chairman and chief executive officer, said Chrysler will continue to invest in that plant, as well as one in Brampton. But the long-term future of the plants depends on them being competitive with other locations, he said.

Unifor, the union that represents 39,000 auto industry workers in Canada, has said Canadian labour costs are competitive, especially now that the Canadian dollar has declined roughly 10 per cent against the U.S. dollar from last year’s highs.

The Detroit Three — Ford, General Motors and Chrysler — all operate plants in Canada but are adding capacity in places such as China, Russia and the United States, the report noted.

Total global vehicle production last year was 81.9 million units, up 3.3 per cent from 2012.

North American production is expected to reach pre-recession levels by 2015, the report predicts.

Most new capacity built in North America is expected to come from Japanese, South Korean and other offshore auto manufacturers, not U.S.-owned companies. The Detroit Three accounted for 60 per cent of all North American production in 2011 but that’s expected to decline, the report said.

Most new capacity will be added in the southern U.S. and Mexico, the report predicts

Outside of North America, production will grow significantly in the Asia/Pacific region, especially in China and India, as well as Eastern Europe and South America, the report said.

China is already the largest vehicle sales market in the world, having surpassed the U.S. The Asia/Pacific region now accounts for 50 per cent of all auto industry production, up from 30 per cent in 2000.

Major Chinese and Indian assemblers, such as Geely, Chery, GreatWall Automobile, Nanjing Automobile, Changfeng, ChangAn, Tata, Mahindra & Mahindra and others, will increase their parts purchasing in China, India, Eastern Europe, Latin America and, in the not too distant future, North America.

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